Separation of money and state

(Andrew Downing) #1

I had not really thought of this before, but it seems like a laudable political goal.
Kind of like separation of church and state; it acts in the best interests of both parties.

Listen to this guy explain it, then tell me why he’s wrong/right?

(Frew) #3

Crypto-currencies already exist and people can and do use them to get around financial controls imposed by banks. Other than saying that this is okay and a growing phenomenon, what exactly is he arguing for? Maybe I missed something.

(Andrew Downing) #4

I don’t know if you’re familiar with this guy. He’s a crypto-currency evangelist. He testified to the Australian Senate enquiry on crypto-currencies a few years back. Similarly to the Canadian Senate and the US Senate etc.

I’m probably listening with more background context and software architectural insight than is available in the video alone.

In this video, he’s pointing out the structural flaw in a financial systems that are used as a system of control. This is quite new in historical terms, but is getting stronger, and the stronger it gets, the more permissions are required to do anything, the more it produces financial friction and reduces innovation in a financial system that is already quite linear in its growth patterns.

By comparison, the crypto-currency systems are inherently, structurally unable to be used as a system of control. That’s disruptive, just as a starting point. As you pointed out, people already use it to work around the controls on fiat currency systems. Most notably, in countries where governments are most repressive/regressive, they are used to work around that, but also where fiat currencies fail (as they frequently do), such as Venezuela, when people no longer trust the government money, crypto’s just spring up to replace them.

But that’s just the starting point. The technological development curve on this stuff is phenomenal. It’s exponential, as happens anywhere you have permission-less networked innovation (like how the internet grew). That has the effect that at first it seems slow to grow, kind of niche and unimportant, but at some point it hits the elbow of the curve and it’s development growth rate goes vertical (remember the DotCom boom?). My sense is that we’re on the cusp of that, but MUCH bigger.

I’m seeing functionality like distributed exchanges for ANYTHING (forget regulating exchanges to stop or slow this down - there won’t be central exchanges to regulate soon), streaming money (imagine only paying insurance per second that you actually drive your car, or trading the power from your solar panels, second by second as the sun shines or the clouds move around), smart contracts that don’t rely on courts or contract law and that transact at up to millions of transactions per second, globally.
Amidst all this, all of the systems are becoming more anonymous, not less.

Some of these systems already exist, some are in beta-test right now and some are due to be released in the next few months, and the enthusiasm that is driving their development is extraordinary. The raw economic efficiency of this in countries that embrace it, will let them surge ahead of countries that do not.

When we’re done with this, the idea that we should have a separation of money and state will be similar in status to the idea that we should have a separation of church and state. Like, of course we should; why would you want a government controlling your money, or your religion?

(Frew) #5

I thought he overplayed the control aspect of government backed currencies. There is some of it, some by banks too, but I don’t think it factors that highly in people’s minds. The only example that most Australians would know, would be the financial blockade of Wikileaks by Visa and Mastercard. I know of others (I link to a very relevant one below), but I follow politics quite closely. That isn’t to say it wouldn’t feature as motivation to get crypto-currencies, I just don’t think its something most people feel they chafe under.

The idea of government currencies becoming reduntant raises a lot of questions, most importantly for the government, how do you collect taxes if there is no currency? How would the services we rely on from the government be funded? I like my government funded services. There is also some use in governments being able to control both interest rates and inflation, particularly to prevent or alleviate economic crises. I am okay for them to have this control at the moment as I see more upside than downside, as long as if I lose faith in the currencies value, I can go get me some crypto to shield myself from the fallout. As the economy changes this may be less of a problem, I don’t know.

The ATO and ASIC are pretty quick and aggressive when it comes to dodging taxes and the ATO have flagged interest in crypto-currency investors. It may not be much of a problem for now, except for owners of crypto-currencies having more need for accountants to calculate capital gains tax. But they will get more aggressive if they feel the need.

There was the scandal of ASIC blocking Melbourne Free Uni’s website because it was hosted along with some fishing scam which they blocked without warning or consequence. There is a good chance they will pull the same moves here, regardless of effectiveness, much like blocking TPB.

These may need some policy thought as we go forward.

Another thing that we may want to weigh in on is local banks blocking transactions and closing accounts related to crypto-currencies. The stuff in this article is pretty terrible. I missed it because I wasn’t newsing in early January.

(Andrew Downing) #6

“I just don’t think its something most people feel they chafe under.”, and then in the ATO flagged interest link, they said “Another reason is their mistrust and hostility towards the traditional banking system.”.
So you may be wrong about the sentiment.

Funnily enough, Wikileaks ended up thanking Visa & Co. for the financial blockade. Their patrons switched to $BTC and as a consequence Wikileaks profited greatly, which is exactly as Andreas described things happening; using money as a control system in the face of a free (as in speech) alternative just reduces the use of fiat currencies. It also put Wikileaks in the position of being able to operate globally without surveillance or other usual interference (esp. if they trade into privacy coins like Monero, Verge or ZCoin).

The big four banks in Australia all blocked accounts of crypto-currency businesses back around the end of 2015. It wasn’t based on government regulation. They just decided to do it. Frankly, I think it was an anti-competitive practice and should have been viewed as illegal (there is a mention of this in our crypto-currency policy) . There was a government investigation, but it was only to decide whether they had colluded to do this. If they had been found to have colluded, that would have been an illegal cartel-like activity, but the investigation concluded that they did it independently, so somehow that was OK. They suspended their blockade for the duration of the investigation, and then reinstated it, resulting in the drama at CoinSpot that you linked.

It actually goes further than just hitting crypto businesses. The banks have been freezing individuals accounts where they think they have been involved in crypto-currencies …
Note their account policy says: “because the destination account previously has been connected to a fraud or an attempted fraudulent transaction or is an account used to facilitate payments to Bitcoins or similar virtual currency payment services”. It’s quite explicit. If they don’t like what you are doing with your money, regardless of whether you have actually done anything illegal, they will deny you banking services.

These are just the really overt actions that make it clear that you don’t actually own the money in your bank account. The bank does, and they will control it how they please. I don’t recall whether Andreas mentioned his own personal example of this, but in Greece, the government just closed the banks one Wednesday, then re-opened them on Saturday with 20% less money + withdrawal restrictions. Also, in India recently, I don’t know if you heard, but one day, with just 4 hours notice, they dropped two of their largest cash denominations as legal tender, instantaneously relegating millions to additional poverty for existing outside of their control. And lets not even think about the billions of people who are un-banked simply because they are not profitable.

Even the banks here in Australia arbitrarily change account conditions without needing to renegotiate. They just change fees and interest rates whenever they like. Notably, they charge the highest fees to the accounts of the poorest people, and at the same time, they are slowly squeezing cash out of the economy, effectively imposing an unavoidable tax on the poorest members of our community. Try getting your dole in cash!

On a personal note, CBA once charged me $50 for the failure of an automated payment. Sure, there were insufficient funds, but only because of a surprise fee they charged, and it wasn’t even a payment to them. They just fined me $50 for their own failure to provide an advertised service. The bank manager said “that’s our policy”. I said, “What? You policy is to just take my money when you feel like it.” He said “Yes. that’s our policy, but you don’t need to hold an account with us”, so I didn’t.

Privacy vs. surveillance is also another key issue that PPAU cares about deeply, but somehow while focusing on issues like internet surveillance & censorship, we failed to notice the far more insidious growth of government surveillance via bank reporting. It’s been incremental, but Austrac keeps increasing the depth of their tracking, ostensibly to stop funding of terrorism, but the main effect is to stop the cash economy, so that every transaction can be monitored and controlled, while terrorist funding mostly comes from nation states (some of whom are our trading partners) and drug money in $USD but nobody suggests we should ban that.

Also, did you notice HSBC getting busted for laundering $USD 800 Billion in South American drug cartel money? They got fined a few billion. Just the cost of doing business. Nobody went to prison, despite it being found that they had remodelled their bank tellers stations to support passing those large samsonite suitcases full of cash through, and weighing machines for the cash because counting it was too hard.


I don’t think there will be no $AUD currency (at least not for a very long time). I think there will be global currencies and local currencies. They will be traded through distributed exchanges as tokens (take a look at Waves, 0x, Kyber Network. etc).

Taxes will still happen, but guess what?, they will probably have to switch to a tax base remarkably like the PPAU policy recommendation. Tax hard limited physical assets and resources like land, carbon, physical items that you purchase. Do not tax unlimited resources like bits/bytes, communication, collaboration etc. Do not tax ideas. Do not tax trade. Do not tax innovation. Do not tax work. This is almost exactly the PPAU tax plan.

Another thing that happens when a government spends more on those government services you like, is that they essentially loan more money into existence, increasing and therefore diluting and inflating the currency. The effect is that any money we have becomes worth less over time. Australia has averaged about 2% inflation over the last 10 years, which isn’t considered too bad, but that still means you lose a third of the value of your money about every 20 years. Taxing the wealthy sounds like a nice answer because it provides a matching reduction of the money in circulation (limiting inflation), but under our bank controlled system, it also reduces economic activity such that we need to lower the money supply even further to avoid inflation, because money supply really needs to match economic activity. This is a downward spiral, witnessed in all its glory recently in Venezuela with it’s current 13000% inflation.

I think the best economic strategies involve driving up economic activity as high as we can, so that a moderate tax on that can balance the cost of the social services we want. This also matches our tax policy.

Incidentally, a senator in Arizona just raised a bill to allow payment of state taxes in crypto-currencies.

Actually, my best understanding is that regular economic crises are an inherent feature of fiat/debt based currency systems. All fiat money is debt. It is loaned into existence, as a combined loan/money supply action. Money as debt increases until people can no longer afford to loan more, and then the money supply slows down because people get less loans, and then you have a financial crisis. Eventually, the people pay down their loans and are able to loan more, and we rise back out of recession as the money supply resumes. Rinse, repeat. Rinse, repeat, Rinse repeat. Retire. Die.
The banks continue to profit throughout this. Even if they go really stupid and fail, we just bail them out at everyone else’s expense.
This is a global system of indentured servitude, but the chains feel comfortable after a while.

By comparison, crypto-currencies are not debt based. Supply side is fixed, so they inflate/deflate, based on demand. The harder you and others work and trade around any particular currency, the more you increase demand for it, and the higher its value goes. Also, your money is your own, rather than being an expression of indebtedness, so you control your own destiny. Highly libertarian.